Rates on the Rise

I thought I would take a brief break from my oil rampage and talk about something that has really hit home this week; mortgage rates! We are on our 6th day in a row of rising mortgage rates and the whole time the DOW has really not moved all that much. We have gone from 5.875% on a 30 year fixed to 6.25% in less than a week! Why? Well I can think of a wholesale list of reasons but I can really isolate it to just two.

First, if you look at the numbers and read between the lines most analysts and traders think we may have "lucked out" and skirted a recession. What does this mean? Well I believe they are "hoping" the U.S. economy (at least most entities in it) will start to rebound from the economic woes of the past. Second, U.S. financial firms (i.e. banks, insurance companies, hedge fund enterprises etc.) are still experiencing continued losses due to the mortgage fall-out a point at which most analysts thought would be at least some what "contained" by now. However, the fact remains the "national" housing slump continues and most believe will continue for quite some time while at the same time losses continue to hit balance sheets, delinquencies are still rising, foreclosures are still rising and home prices continue to fall. Combine these two "thoughts" and what you have are the selling of MBS (Mortgage Backed Securities) because the risk has not "funneled" out as most had planned and an "upbeat" optimism in the stock market and rates are on the rise.

While I believe rates will rebound in the mid & long term future the fact still remains that our industry and therefore mortgage rates still and more than likely will remain extremely volatile. Only time will tell whether or not my educated guess will come true but I would like to think so.

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